Credit Smart

Options for overcoming thin credit


If you’ve had little or no credit history and have no income, secured cards and becoming an authorized user are your best options

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Question for the expertDear Let’s Talk Credit,

I have a “thin” credit status and do understand, mostly, what it is. I have lived with my parents since October of 2008 to help my dad take care of my mom and the house. I was technically her caregiver until May of 2012. I’ve had a checking account with a national bank since late 2008. I have applied for both secured and nonsecured credit cards, and I keep getting turned down. I just need an opportunity to establish a few hundred dollars or so of credit so I can rebuild my credit. Sorry for the long question, I’m just frustrated and need your help. Thanks in advance. — Jeanne

Answer for the expertDear Jeanne,
I can hear your frustration in your letter. If you do not currently have an income, that may be why you have been denied. However, don’t worry. You do have options to begin building a positive credit history. Let’s explore them in detail.

First, I suggest you inquire at your bank about applying for a secured credit card. As you may know, the way a secured card works is that you deposit money into a separate account at the bank (usually $300-$500) and that amount is typically the credit limit on the card. You can then use the card like any other unsecured credit card.

There are a couple of things to consider when applying for a secured credit card. First, you want to be sure that the card is reported to the major credit bureaus and that it does not have high fees. Second, even the secured deposit may not be enough to qualify for a secured card if you do not have any income.

If you do not currently have an income and want to establish credit, you could consider asking your parents to add you as an authorized user on one of their credit card accounts. Another option is to apply for a joint credit card with one of your parents. The downside of using this approach is that you could damage another person’s credit if you do not use the card responsibly.

Should you have income of your own, you might consider shopping online for an unsecured credit card. Credit issuers have loosened up requirements and some banks are issuing unsecured cards to people with little credit history as long as they have adequate income.

Finally, remember to make the most of the opportunity to build a positive credit history and use your credit wisely. Make on-time and as-agreed payments each month and do not overextend yourself.

Let’s keep talking!

See related:Turned down for a secured card. Now what?, The path to a lower interest rate


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